Takeaways
- Developing smart money habits can change your relationship with money.
- Building on daily money habits will convert them into monthly and lifetime habits.
- Focusing on building your net worth over time will align with your financial goals.
- Smart money habits range from paying off debt to investing in cryptocurrency.
- Working with a financial coach can be a valuable money hack that accelerates your financial success.
Mastering your personal finances is an iterative game. Everyone starts from a different point. Whether you are in debt after college, trying to save money, or starting to invest for the first time, it’s essential to get the fundamentals right.
Setting up the foundation of your finances correctly can lay the groundwork for a lifetime of financial success. Sometimes, it's not about doing things right but instead focusing on doing the right things. That starts with building the right smart money habits.
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15 Smart Money Habits
Here are 15 smart money habits that can drastically change your relationship with money and provide the catalyst you need to increase your net worth. The habits you can start adopting today include:
1. Creating a Financial Plan
One of the most significant steps to take in finance is to create a financial plan for the first time. You may not know where to start with this process, but the most important part is to get started.
A financial plan is a document that outlines your short-term and long-term financial goals. In addition to creating these goals, it provides actionable steps along the path that you need to take to meet those goals.
Most short-term goals focus on improvements in the next month or two, while long-term goals usually span five to ten years. You can work with a financial advisor to create a financial plan or do it yourself.
2. Starting a Budget
As part of your financial plan, you will gain a more granular view of your daily, monthly, and yearly goals. To accomplish those money goals, you need a roadmap to success. That's where making a budget comes into play.
The budgeting process is relatively straightforward because it only involves two variables: income and expenses. You need to map out your monthly sources of income and then analyze your monthly payments. To get your budget on track, ensure that your income exceeds your expenses. This will leave you with a surplus to help you achieve financial goals, such as paying off debt.
The good news is that budgeting doesn’t have to be boring. Plus, you can leverage technology by using one of our favorite Budgeting Apps.
There are many different types of budgeting systems to choose from that may suit your personality and financial needs. Here are some budgeting systems to consider:
>> Want to play with the numbers? Try our plug-and-play 50/30/20 Budget Calculator
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3. Pay Off Debt
One of the smartest money moves you can make is to pay off high-interest debt. Debt with a high Annual Percentage Rate (APR) tends to produce high-interest payments, which can eat up too much of your hard-earned monthly income.
Depending on your preference, you can explore paying off debt using two commonly deployed methods: the snowball method or the avalanche method. Both have their merits. Here’s the difference:
- Snowball method: Focusing on paying off interest with the highest balance first, and is agnostic to the interest rate.
- Avalanche method: Aims to pay off the most expensive debt, or debt with the highest interest rate, first, regardless of the debt balance.
You might have more debt than you realize. Take a tally of your credit cards, personal loans, student loans, and mortgages to see where you stand.
4. Open a High-Yield Savings Account
Everyone wants a safe place to stash their cash. That's why it's a smart money habit to regularly analyze the banking landscape and search for a high-quality, high-yield savings account to park your money.
A high-yield savings account lets you simultaneously earn interest income and gives you an FDIC-insured account to store your money. Interest income can increase your passive income, and an FDIC-insured bank account protects you against any bank issues.
You can explore our favorite picks for the Best High-Yield Savings Accounts.
Smart Tip:
Annual Percentage Yield (APY) on your savings account will fluctuate based on the Federal Reserve’s federal funds rate. Keeping track of this metric will give you a pulse on how much your account should be earning.
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5. Create an Emergency Fund
Generally speaking, every financial expert agrees on at least one piece of financial advice: having an emergency fund is a “must-have.” An emergency fund is a cash savings fund with at least $1,000 to $3,000 to help blunt any financial emergencies.
An emergency fund shields you from financial disasters and acts as a cushion between you and life's unexpected financial demands. If a car breaks down, the ceiling starts to leak, or you need to pay for an unexpected medical expense, your emergency fund gives you the funds to handle these situations.
>> Plug and Play with our Emergency Fund Calculator
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Start dedicating at least $25 to $50 each month for your emergency fund. You can place this cash in a high-yield online savings account to help it earn interest while you sleep.
6. Save a Slush Fund
Smart money habits tend to build on themselves. Once you have topped off your $3,000 emergency fund, you can distance yourself even further from financial calamity with a slush fund.
A slush fund is an account where you save at least three to six months’ worth of living expenses. You can refer to your budget (read above) to see how much you are spending each month. From there, you simply need to apply a multiple to that amount.
Here's how it works: Let's say you spend $3,000 per month; your slush fund should be between $9,000 and $18,000 in total. That might look like a lot in the aggregate, but remember that it can take years of savings to reach that goal (or one big bonus payment).
>> Plug and Play with our Slush Fund Calculator
Financial experts recommend maintaining a minimum slush fund of at least 3 to 6 months, as it generally takes 90 to 180 days to find new employment if you are looking for a new job or get laid off.[1]
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7. Use Credit the Right Way
Using credit products, like credit cards, personal loans, and mortgages, to optimize your finances is a smart money habit. You can utilize these products to enhance your credit score and lower your borrowing costs.
Boosting your credit score can increase your home affordability while providing access to mortgages with better terms and lower rates. It also allows access to the best credit cards, which you can use to maximize rewards, travel for free, or earn cash back on purchases.
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8. Work to Increase Earnings
Not all situations can be fixed with more money. However, your finances are one area that might help tremendously. Increasing your gross income, or the amount of money you earn, provides you with more cash flow to achieve your financial goals, such as investing in stocks or achieving financial independence.
One of the best ways to start earning more money is to begin freelancing, consulting, or working a side hustle. In today's gig economy, there are thousands of ways to make money from the comfort of your own home.
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9. Invest in Assets
You might be asking yourself: what is an asset? An asset is something that is expected to provide a future economic benefit or utility. You can increase your net worth over time by accumulating assets such as stocks, bonds, real estate, and cryptocurrency.
While there are many different types of asset classes, investors tend to focus on accumulating assets in a particular order and percentage of their holdings, known as asset allocation. Here are some assets you should know:
- Cash and Cash Equivalents: Can be lent to earn interest income
- Stocks: Provide income in the form of dividends or capital appreciation
- Bonds: Pay investors interest income
- Real Estate: Owners earn rents from tenants
It’s a smart money habit to start investing in assets as soon as you have enough discretionary income. Liquid assets can generally be converted into cash quickly, while illiquid assets might take more time.
10. Pay Yourself First
Getting behind on your finances tends to follow a similar path. Your paycheck rolls in, and suddenly, you start paying everyone – your credit card bill, mortgage, insurance, groceries, etc. – before yourself.
Financial professionals often argue that this should be flipped on its head: start paying yourself first. They recommend this approach to ensure that you prioritize your financial health, including your savings and investment goals.
There are even budgeting systems created based on this approach, such as the pay-yourself-first budgeting method. You can take care of this behind the scenes by automating your finances.
11. Automate Your Finances
Setting up a financial ecosystem that operates while you sleep is a fantastic financial goal. Automating your finances removes decision fatigue from your financial life, allowing you to start enjoying things beyond just paying the bills.
Your checking account acts as the central node of your automated system. The first step is to get all your paychecks directly deposited into this account. From there, you can set up a percentage of your earnings to be dispersed to your high-yield savings account or online brokerage account.
Automating your finances is a smart money habit because it requires setting up the system only once. This high-impact money move leverages technology to work for you.
Read More: Best Online Brokerage Accounts
12. Keep Debts Low
One of the most common financial mistakes is taking on too much debt. You can be stuck in high-interest credit card debt, personal loans, and mortgages. However, in today's economy, leveraging these credit products is a must-do. So, what are you to do?
Personal finance experts advocate using the 30% rule. The 30% rule says that you should not use more than 30% of your available credit card debt. This rule helps you manage your monthly payments and keep your overall credit card debt under control. Lenders look at your debt-to-income ratio to evaluate whether you are a good candidate for certain credit products, too.
Read Also: What Is Your Personal Savings Rate?
13. Contribute Regularly to Retirement
Thinking long-term is a critical part of building smart money habits. By forming simple habits today, you can make a lasting impression. Nowhere is this highlighted more than in saving for retirement.
Professionals in their 20s and 30s sometimes struggle to see the advantage of deferring their compensation until later in life, only to realize it's too late. By starting to save for retirement now, you can build up a significant investment portfolio.
Here are some retirement accounts to know:
Start contributing to your retirement account today for as little as $50 per month. Then, you can increase that amount until you reach your account's maximum annual contribution limit. Who knows, you might even be able to retire early.
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14. Advance Your Career
Unless you are starting your own business, you should think about advancing your career as a smart money move. One of your most valuable assets is consistent employment. Earning a steady paycheck can help you buy investments, pay off debt, take out loans, or buy a house.
There are numerous ways to enhance your skill set at work, including refining your public speaking and written communication skills, obtaining industry-specific certifications, pursuing an advanced degree, or assuming additional work responsibilities. To advance in your career and earn more money, it's essential to establish specific, measurable, and actionable goals to track your progress.
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15. Monitor Your Net Worth
Tracking your progress on the road to building wealth keeps the game fun. That’s why robo-advisors and budgeting apps have built net worth trackers to gamify the experience.
Net worth is defined as your Total Assets minus your Total Liabilities. You can increase your net worth by increasing the number of assets you own and decreasing your liabilities. Depending on where you are in your financial journey, you should focus on one of these at a time.
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Smart Summary
There is nothing more powerful than building smart money habits. By changing your relationship with money, you can quickly redirect your financial future. Smart money habits build on themselves rapidly and eventually start to compound. Setting up the proper framework in your personal finances allows your money to do the heavy lifting. That way, you can get back to doing the things you love.
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(1) U.S. Bureau of Labor Statistics. Unemployed people by duration of unemployment. Last Accessed July 19, 2025.
